Suntech Reports Fourth Quarter and Full Year 2006 Financial Results

WUXI, China, March 12 /Xinhua-PRNewswire/ -- Suntech Power Holdings Co., Ltd. , one of the world's leading manufacturers of photovoltaic (PV) cells and modules, today announced fourth quarter and full year 2006 financial results.

Fourth Quarter and Full Year 2006 Highlights -- Fourth quarter 2006 total net revenues went up 144.8% year-over-year to $217.9 million. Non-GAAP(1) Suntech Group net income attributable to holders of ordinary shares grew 101.4% year-over-year to $35.5 million, or $0.23 per non-GAAP diluted American Depository Share (ADS). Each ADS represents one ordinary share. -- Fourth quarter 2006 production output was 55.3MW; full year 2006 production output was 160.1MW, representing 136.5% year-over-year growth. -- Full year 2006 total net revenues went up 165.0% year-over-year to $598.9 million. Suntech Group net income attributable to holders of ordinary shares grew 275.6% year-over-year to $106.0 million, or $0.68 per diluted ADS. -- Annual capacity grew from 150MW at the end of 2005 to 270MW at the end of 2006, representing an increase of 80%.

''We exceeded our initial fourth quarter output and revenue guidance for our core business as we increased our sales of PV modules, achieved sequential average selling price increases throughout 2006 and ramped up recently installed production lines ahead of schedule,'' said Dr. Zhengrong Shi, Suntech's Chairman and CEO. ''Our operations are the healthiest they have been since our IPO as our low cost per watt strategy combined with our strong technology capabilities, expanding sales network and successful silicon procurement keep us on track to achieve industry leading growth.''

''During the quarter, we cemented our silicon supply for 2007 and beyond by signing additional long term, fixed price silicon supply agreements. In fact, we have secured more silicon than we require to meet our upwardly revised projected 2007 PV cell and module output target,'' said Dr. Shi. ''This ability to secure silicon, despite the global shortage, is one of the key reasons we have been able to increase our 2007 production output target from 250 megawatts to 280 megawatts and our year-end capacity target from 390 megawatts to 420 megawatts.''

Commenting on Suntech's international sales development, Dr. Shi said, ''In the fourth quarter, we continued to diversify our sales geographically and extended the reach of our global network. In addition to partnering with SunEdison, we continued to build momentum in the U.S. market and our current pipeline indicates that we will be able to more than triple our sales to this region in 2007. With the integration of MSK's sales network and the establishment of Suntech Europe, we have set the foundation to further expand our selling channels in key European markets such as Spain.''

Recent Business Highlights -- In February 2007, Suntech closed an offering of $500 million convertible senior notes, more than 60% above the original offering size. Suntech plans to use the net proceeds to expand production capacity, procure raw materials, repay a bridge loan related to the MSK acquisition and for other corporate purposes. -- Multi-year silicon supply agreements were entered into with REC, Comtec and Sunlight Group in the fourth quarter of 2006. Combined with existing agreements with MEMC and several leading China-based silicon suppliers, Suntech expects over two-thirds of silicon supply in 2007 needed for its projected output will come from long-term silicon supply agreements, which will ramp up over the year and have average wafer costs measurably below 2006 wafer purchase prices. -- After winning the contract to supply over 23MW of solar modules to the world's largest solar farm in Spain, Suntech continued to achieve steady sales wins in Spain. In the fourth quarter of 2006, Suntech sales to Spain increased four-fold above the nearly 10% of total revenues in the first nine months of 2006 and it is currently expected that it will grow to be approximately 20% of total revenues in 2007. -- In February 2007, Suntech made the strategic decision to halt MSK's module production activities in Japan and initiated immediate actions to focus MSK on its three strategic goals. MSK will concentrate efforts on BIPV product development and expanding BIPV sales into key geographies beyond Japan, growing Japan-based sales and utilizing MSK's sales organization to expand Suntech's customer base. -- Suntech recently entered into multiple sales agreements with Conergy AG, a leading global solar system integrator, to supply PV modules with a value of approximately $270 million in 2007. -- Suntech established Suntech Europe in January as part of a natural evolution to expand its customer base as well as to deepen the service and support offered to its customers in Europe, the Middle East and Africa (EMEA). The headquarters for Suntech Europe will be in London with sales offices expected to be opened in key cities in the region commencing in 2007. -- Suntech recently joined the Global Roundtable on Climate Change (GROCC) to raise the profile of solar energy and encourage governments worldwide to develop effective policies on climate change. Fourth Quarter 2006 Group Results Income Statement Summary (In millions, except for per ADS data) Suntech Group Suntech Group Suntech Non-GAAP GAAP Non-GAAP Excluding MSK Net revenues $217.9 $217.9 $190.3 Gross profit 48.5 49.1 49.9 Income from operations 29.7 34.2 38.6 Net income 31.4 35.5 37.8 Net income per diluted $0.20 $0.23 $0.24 ADS Suntech Group Results for the Fourth Quarter of 2006 Excluding MSK

Suntech Group's net revenues excluding MSK for the fourth quarter of 2006 were $190.3 million, representing an increase of 28.2% sequentially and 113.8% year-over-year. Excluding MSK, Suntech recorded a non-GAAP gross profit of $49.9 million, representing an increase of 29.2% over the third quarter of 2006 and 100.8% over the fourth quarter of 2005. Non-GAAP gross margin excluding MSK, for the fourth quarter of 2006 was 26.2%, compared with 26.0% in the third quarter of 2006 and 27.9% in the fourth quarter of 2005. Gross margins excluding MSK in the fourth quarter 2006 increased slightly from the previous quarter. Excluding MSK, Suntech's non-GAAP income from operations for the fourth quarter of 2006 was $38.6 million and the operating margin for the quarter was 20.3%, compared with 21.3% in the third quarter of 2006 and 22.0% in the fourth quarter of 2005. The primary reasons for the higher operating expenses in the fourth quarter of 2006 were additional accounting expenses and bank fees due to the shift in sales to Letter of Credit-based payments and a foreign exchange mark-to-market loss. Excluding MSK, non-GAAP net income attributable to holders of ordinary shares for the fourth quarter of 2006 was $37.8 million, or $0.24 per non-GAAP diluted ADS.

Breakdown of Fourth Quarter 2006 Net Revenues (Excluding MSK) Q4 2006 % of Q4 2006 Growth vs. Q4 Growth vs. Q3 (in millions) Net Revenues 2005 2006 % % PV Cells $9.5 5.0 (70.1) (76.2) Standard PV Modules 180.4 94.8 218.3 67.2 PV System 0.4 0.2 (27.0) (40.1) Integration, BIPV and Others Total $190.3 100 % 113.8 % 28.2 %

Suntech excluding MSK shipped 48.7MW of PV cells and modules during the fourth quarter of 2006; average sales prices for PV modules were $3.91 per watt compared with $3.86 per watt in the third quarter of 2006 and $3.49 in the fourth quarter of 2005. In the fourth quarter of 2006, Suntech strategically moved towards selling a higher percentage of PV modules than PV cells to capture the incremental revenue and reduce PV cell sales to module making competitors. This was made possible by the increased silicon wafer supply, which reduced Suntech's need to rely on wafer exchange or tolling agreements.

Suntech Group Consolidated Results for the Fourth Quarter of 2006 Including MSK

Suntech Group's non-GAAP gross profit for the fourth quarter of 2006 was $49.1 million and the non-GAAP gross margin was 22.5%. Non-GAAP income from operations for the fourth quarter of 2006 was $34.2 million and the non-GAAP operating margin was 15.7%.

Capital expenditures, which were primarily related to production capacity expansion, were $15.3 million in the fourth quarter of 2006. Depreciation and amortization expenses in the fourth quarter of 2006 were $4.9 million.

Suntech Group Consolidated Results for the Full Year 2006 Including MSK

Suntech Group's net revenues for the full year 2006 were $598.9 million, an increase of 165.0% year-over-year. For the full year 2006, Suntech Group derived approximately 20.8 % of total net revenues from sales of PV cells and 78.8% from PV modules.

Gross profit for the full year 2006 was $148.9 million, an increase of 117.2% over the full year 2005. Gross margin decreased to 24.9% in 2006 from 30.3% in 2005. Suntech Group's income from operations for the full year 2006 was $103.2 million, an increase of 142.0% year-over-year. Operating margin was 17.2% in 2006, down from 18.9% in 2005. Net income attributable to holders of ordinary shares for the full year 2006 was $106.0 million, an increase of 275.6% from 2005. Diluted income per ADS was $0.68 in 2006, compared to $0.30 in 2005.

Capital expenditures were $52.3 million in the full year 2006. Depreciation and amortization expenses in the full year 2006 were $11.9 million.

As of December 31, 2006, Suntech had cash and cash equivalents of $225.5 million compared with $314.2 million at the end of the third quarter of 2006. Short term debt rose to $288.2 million at the end of the fourth quarter of 2006 from $221.7 million at the end of the third quarter of 2006, primarily as a result of continuous leverage of banking facility to support expanding production scale and capital expenditures and cash flow management needs related to PRC foreign currency controls.

March Analyst Day

Suntech will host an Analyst and Investor Day in Hong Kong on Monday, March 26, 2007. The event will address all key aspects of Suntech's operations and vision to become the globally leading pure-play producer of solar energy products. For more information, please contact The Piacente Group at +1 212-481-2050 or via email at suntech@tpg-ir.com.

Outlook for First Quarter and Full Year 2007

Based on current operating and other conditions, Suntech expects its first quarter 2007 total production output, including contribution from MSK, to be in the estimated range of 60MW to 62MW and its total net revenues to be in the estimated range of $220 million to $228 million.

As the Company will have carryover spot market priced silicon supply from 2006 and as its silicon supply from its long term supply contracts will not become a majority of its silicon supply until the second quarter of 2007, the Company will likely have a slight decline in the gross margin in its core business in the first quarter of 2007 with stabilization and improvement expected in the gross margin of its core business thereafter.

Such guidance takes into account the assumption that Suntech's total PV cell production capacity will remain constant at 270MW until the second quarter of 2007 when additional capacity is expected to become operational. In addition, the first quarter 2007 guidance also takes into account the shorter month of February and the Chinese New Year holiday.

Suntech has increased its total PV cell production output target for 2007 from 250MW to 280MW. This target takes into account third party PV cell purchases originally contracted by MSK. Suntech has also raised its expected 2007 year end PV cell production capacity target from 390MW to 420MW.

Suntech expects capital expenditures for the full year 2007 to be in the estimated range of $80 to $100 million.

Given the accelerated integration between Suntech and MSK's business operations, Suntech will not continue to report separate results or give separate guidance for MSK in the future.

Conference Call Information

Suntech's earnings announcement conference call will take place on March 12, 2007 at 8:00a.m., Eastern Time, which corresponds to March 12, 2007 at 8:00p.m., Beijing/Hong Kong time. To access the conference call, please dial +1-617-614-3523 (for U.S. callers) or +852-3002-1672 (for international callers) and ask to be connected to the Suntech earnings conference call.

A live and archived webcast of the conference call will be available on the Investors section of Suntech's website at http://www.suntech-power.com/ .

A replay of the conference call will be available until March 26, 2007 by dialing +1-617-801-6888 (passcode: 99523904).

About Suntech

Suntech Power Holdings Co., Ltd. is a leading solar energy company in the world as measured by both production output and capacity of solar cells and modules. Suntech provides solar solutions for a green future. Suntech designs, develops, manufactures, and markets a variety of high quality, cost effective and environmentally friendly PV cells and modules for electric power applications in the residential, commercial, industrial, and public utility sectors. Suntech's majority-owned subsidiary, MSK Corporation is a pioneer within the higher value-added building-integrated photovoltaics (BIPV) space. Suntech's customers are located in various markets worldwide, including key markets throughout Europe, Japan, China and the United States. For more information, please visit http://www.suntech-power.com/ .

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute ''forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as ''will,'' ''expects,'' ''anticipates,'' ''future,'' ''intends,'' ''plans,'' ''believes,'' ''estimates'' and similar statements. In particular, the projected first quarter and fiscal year 2007 data, regarding production output, total net revenues and consolidated net income, core business gross margin, the business outlook and quotations from management in this announcement, statements regarding Suntech's beliefs and expectations about integrating the business and operations of MSK Corporation and the resulting synergies and benefits, as well as Suntech's strategic and operational plans, are forward-looking statements. Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in Suntech's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 20-F. Suntech does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with GAAP, Suntech uses the following non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude items related to share-based compensation and the purchase price allocation effect related to the MSK Corporation acquisition. Management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in Suntech's core business across different reporting periods on a consistent basis, independently of stock-based compensation expenses and the purchase price allocation effect related to the MSK acquisition. Thus, the non-GAAP financial measures provide investors with another method for assessing Suntech's operating results in a manner that is focused on the performance of its ongoing operations. Management also uses these non-GAAP measures internally to make an apples-to-apples comparison of the business and financial performances of current and historical results, for strategic decision making, forecasting future results and evaluating the Company's current performance. Many analysts covering Suntech use the non-GAAP measures as well. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data, the non-GAAP results should be reviewed together with the GAAP results and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" set forth at the end of this release and which shall be read together with the preceding financial statements prepared under GAAP.

(1) All non-GAAP measures exclude share-based compensation expenses and the amortization expenses incurred from purchase price allocation related to the acquisition of MSK Corporation as of August 11, 2006. For further details on non-GAAP measures, please refer to the reconciliation table and a detailed discussion of management's use of non-GAAP information below.

Note: The quarterly consolidated income statements are unaudited. The condensed consolidated balance sheet as of December 31, 2006 and consolidated income statement for the year then ended are derived from Suntech's unaudited consolidated financial statements. The condensed consolidated balance sheet as of December 31, 2005 and consolidated income statement for the year then ended are derived from Suntech's audited consolidated financial statements. The condensed income statement of reportable segments is also unaudited.

SUNTECH POWER HOLDINGS CO., LTD. CONDENSED CONSOLIDATED BALANCE SHEET (In $'000) Suntech Group Suntech Group Consolidated Consolidated December 31, December 31, 2005 2006 ASSETS Current assets: Cash and cash equivalents 359,324 225,530 Restricted cash 7,997 78,855 Inventories 40,428 200,292 Accounts receivable 1,660 98,855 Value-added tax recoverable 339 26,218 Advances to suppliers 24,001 79,391 Other current assets 2,730 6,525 Total current assets 436,479 715,666 Property, plant and equipment, net 39,718 113,750 Intangible assets, net 2,923 75,751 Goodwill 135 28,551 Investments in affiliates 1,059 2,950 Long-term prepayments -- 132,314 Long-term loan to a supplier -- 22,246 Other non-current assets 1,350 6,727 TOTAL ASSETS 481,664 1,097,955 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings, including current portion of long-term bank borrowings 52,193 288,184 Accounts payable 3,522 40,542 Other current liabilities 16,261 28,096 Total current liabilities 71,976 356,822 Long-term bank borrowings 3,717 19,657 Accrued warranty costs 2,619 8,846 Other long-term liabilities -- 41,625 Total liabilities 78,312 426,950 Minority interest 1,429 18,542 Total shareholders' equity 401,923 652,463 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 481,664 1,097,955 SUNTECH POWER HOLDINGS CO., LTD. CONSOLIDATED INCOME STATEMENT (*) (In $'000, except share, per share, and per ADS data) For the year ended December 31 2005 2006 Suntech Group Suntech Group Consolidated Consolidated Net revenues 226,000 598,870 Total cost of revenues 157,438 449,982 Gross profit 68,562 148,888 Operating expenses Selling expenses 3,667 9,010 General and administrative expenses 18,874 28,274 Research and development expenses 3,358 8,375 Total operation expenses 25,899 45,659 Income from operations 42,663 103,229 Interest expenses (7,907) (6,293) Interest income 296 11,772 Other income (expense) (758) 2,060 Income before income taxes 34,294 110,768 Tax provision (3,753) (7,188) Net income after taxes before minority interest and equity in earnings of affiliates 30,541 103,580 Minority interest (34) 1,410 Equity in earnings of affiliates 121 1,012 Net income 30,628 106,002 Deemed dividend on Series A redeemable convertible preferred shares 2,406 -- Net income attributable to holders of ordinary shares 28,222 106,002 Net income per share and per ADS: - Basic 0.31 0.71 - Diluted 0.26 0.68 Shares used in computation: - Basic 92,047,507 148,697,962 - Diluted 116,825,138 156,106,345 (*) Purchase price allocation is preliminary and will be finalized within one year timeframe from the acquisition date. SUNTECH POWER HOLDINGS CO., LTD. CONSOLIDATED INCOME STATEMENT (*) (In $'000, except share, per share, and per ADS data) Suntech Group Suntech Group Suntech Group Consolidated Consolidated Consolidated 2005 2006 2006 Q4 Q3 Q4 Net revenues 88,989 162,969 217,859 Total cost of revenues 65,407 125,742 169,372 Gross profit 23,582 37,227 48,487 Operating expenses Selling expenses 946 2,889 3,564 General and administrative expenses 8,008 7,050 11,569 Research and development expenses 2,084 2,038 3,626 Total operation expenses 11,038 11,977 18,759 Income from operations 12,544 25,250 29,728 Interest expenses (773) (1,869) (2,390) Interest income 174 4,119 3,152 Other income (expense) (105) 1,707 1,546 Income before income taxes 11,840 29,207 32,036 Tax provision (1,500) (1,617) (1,830) Net income after taxes before minority interest and equity in earnings of affiliates 10,340 27,590 30,206 Minority interest (29) 301 1,123 Equity in (loss) earnings of affiliates 244 838 88 Net income 10,555 28,729 31,417 Deemed dividend on Series A redeemable convertible preferred shares 784 -- -- Net income attributable to holders of ordinary shares 9,771 28,729 31,417 Net income per share and per ADS: - Basic 0.10 0.19 0.21 - Diluted 0.08 0.19 0.20 Shares used in computation: - Basic 98,123,263 148,324,230 149,790,714 - Diluted 132,872,299 154,930,224 156,312,894 (*) Purchase price allocation is preliminary and will be finalized within one year timeframe from the acquisition date. SUNTECH POWER HOLDINGS CO., LTD. CONSDENSED INCOME STATEMENT OF REPORTABLE SEGMENTS (*) (In $'000) MSK Corporation Suntech Excluding Group Effect of Effect of Excluding Purchase Purchase Suntech MSK Price Price Group Corporation Allocation Allocation Consolidated 2006 2006 2006 2006 Q4 Q4 Q4 Q4 Net revenues 190,281 27,711 -- 217,859 Total cost of revenues 140,774 28,468 255 169,372 Gross profit 49,507 (757) (255) 48,487 Operating expenses Selling expenses 2,954 610 -- 3,564 General and administrative expenses 8,851 2,252 466 11,569 Research and development expenses 2,845 781 -- 3,626 Total operation expenses 14,650 3,643 466 18,759 Income from operations 34,857 (4,400) (721) 29,728 Interest expenses (1,946) (431) (12) (2,390) Interest income 3,033 119 -- 3,152 Other income (expense) 199 1,248 98 1,546 Income before income taxes 36,143 (3,464) (635) 32,036 Tax provision (2,128) (3) 301 (1,830) Net income after taxes before minority interest and equity in earnings of affiliates 34,015 (3,467) (334) 30,206 Minority interest (25) 1,148 -- 1,123 Equity in earnings of affiliates 88 -- -- 88 Net income 34,078 (2,319) (334) 31,417 (*) Purchase price allocation is preliminary and will be finalized within one year timeframe from the acquisition date. Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures (*) (in $ millions, except margin data, per share and per ADS data, unaudited) Three months ended December 31, 2005 Suntech Suntech Effect of Group Group Share-based Purchase Non- GAAP Compensation Price GAAP Results Allocation Results Gross profit 23.6 1.2 -- 24.8 Gross margin 26.5% 27.9% Income from operations 12.5 7.1 -- 19.6 Income from operations margin 14.1% 22.0% Net income attributable to holders of ordinary shares 9.8 7.1 -- 16.8 Net income margin 11.0% 18.9% Net income per share and per ADS -Basic 0.10 0.17 -Diluted 0.08 0.13 Three months ended September 30, 2006 Suntech Group Suntech Share- Effect of Suntech Excluding Group based Purchase Group MSK GAAP Compen Price Non- MSK Non- Results sation Allocation GAAP Results GAAP Results Results Gross profit 37.2 0.3 0.5 38.0 0.6 38.6 Gross margin 22.8% 23.3% 26.0% Income from operations 25.3 3.5 1.0 29.8 1.8 31.6 Income from operations margin 15.5% 18.3% 21.3% Net income attributable to holders of ordinary shares 28.7 3.5 0.6 32.8 0.5 33.3 Net income margin 17.6% 20.1% 22.4% Net income per share and per ADS -Basic 0.19 0.22 0.22 -Diluted 0.19 0.21 0.22 Three months ended December 31, 2006 Suntech Group Suntech Share- Effect of Suntech Excluding Group based Purchase Group MSK GAAP Compen Price Non- MSK Non- Results sation Allocation GAAP Results GAAP Results Results Gross profit 48.5 0.4 0.3 49.1 0.8 49.9 Gross margin 22.3% 22.5% 26.2% Income from operations 29.7 3.8 0.7 34.2 4.4 38.6 Income from operations margin 13.6% 15.7% 20.3% Net income attributable to holders of ordinary shares 31.4 3.8 0.3 35.5 2.3 37.8 Net income margin 14.4% 16.3% 19.9% Net income per share and per ADS -Basic 0.21 0.24 0.25 -Diluted 0.20 0.23 0.24 (*) The adjustment is for share-based compensation and amortization expenses incurred from purchase price allocation related to the acquisition of MSK Corporation. For more information, please contact: Steven Chan VP of Business Development Suntech Power Holdings Co., Ltd. Tel: +86-510-8531-8910 Email: ir@suntech-power.com In the United States: E.E. Wang The Piacente Group, Inc. Tel: +1-212-481-2050 Email: suntech@tpg-ir.com In China: Rory Macpherson Ogilvy Public Relations Worldwide Tel: +86-10-8520-6553 Email: rory.macpherson@ogilvy.com